Is E85 on the Rocks?

Number of pumps may be halved by end of 2012

GREENVILLE, S.C. -- On January 1, the petroleum-retailing industry awoke to a nation without a Volumetric Ethanol Excise Tax Credit (VEETC). The tax credit, which provided 45 cents to blenders and fuel marketers for each gallon of pure ethanol blended into gasoline, was arguably the greatest driving force behind the spread of E85 in recent years.

Without it, the future of E85 as a motor fuel is in question, and at least one supporter of the fuel says the number of E85 pumps will be halved by end of this year.

Click here to read more about the end of ethanol tax credit and what it will mean to retailers. And
click here to view an exclusive CSPTV segment: "Getting a Grip on the New Ethanol Reality."

Stewart Spinks, the founder and CEO of the Spinx Corp., Greenville, S.C., told CSP Daily News he remains dedicated to E85, joking, "It's better to support the Corn Belt than the Sand Belt," referring to the Middle East.

At the same time, the chain plans to convert 10 of its 41 E85 pumps to straight 87 octane gasoline by end of January, in light of ethanol price increases. The company saw a "tremendous" increase at the rack in early January, reflecting the loss of VEETC. Thus lower-volume sites, where E85 has not taken off, will be converted.

"I don't want to send the message that we're no longer interested in alternative fuels, but from an economic point of view, the volumes are too low to continue to offer it," he said. "The consumer is saying we want ethanol-free gasoline available."

While earlier in 2011, Spinx was able to sell E85 at a 40-cent differential to regular gasoline, the stores will likely be forced to shrink that spread to 10 to 20 cents.

"We'll eat some margins like our suppliers will, and consumers will pay more for alternative fuels," he said.

And that is the conundrum many E85 advocates face.

"E85's future is in broad uncertainty," John Eichberger, vice president of government relations for NACS said. "For the retailer, it will come down to 'What's my per-gallon cost? What's my per-gallon opportunity?' If I'm going to be taking a bath on E85, I might as well switch it to something I can make some money on."

Meanwhile, Jeff Trinca, spokesperson for Coalition for E85, a group of E85 retailers who support continuing incentives for the biofuel, said he expects a lot more retailers will pull E85, as well. And if nothing is done in Washington, he suspects the number of E85 sites will be halved by the end of 2012.

Read more about the end of ethanol tax credit and what it will mean to retailers in the February issue of CSP magazine, or
click here.